Negotiating a Preferential Trading Agreement

Negotiating a Preferential Trading Agreement

Issues, Constraints and Practical Options

Edited by Sisira Jayasuria, Donald MacLaren and Gary Magee

Presenting a blend of economics and law, this book provides unique insights as well as practical guidance for negotiators considering major issues on the agendas of bilateral and regional preferential trading agreements (PTAs).

Chapter 9: Rules of Origin

Peter Lloyd and Donald MacLaren

Subjects: asian studies, asian urban and regional studies, business and management, international business, economics and finance, international business, international economics


Peter Lloyd and Donald MacLaren INTRODUCTION Rules of origin (ROOs) are a required feature of a China–Australia Free Trade Agreement (CAFTA), as they are for all free trade areas in which the member countries retain their own different systems of trade regulation. Yet, little attention has been paid in the past to rules of origin in Australia and, indeed, in most parts of the world. In a recent paper, Augier et al. (2005) state that ‘Rules of origin are usually ignored for two reasons: they are dauntingly complex and at first sight appear mind-numbingly dull.’ (p. 569) The technicality and complexity of the rules disguise their importance. In fact, the tariff rate applied to any good entering a country is determined by: ● ● ● ● The tariff classification of the good, the rule of origin determining its origin, the tariff rate for the good from this origin, the value for duty of the good (unless duty is based on volume). The first of these is settled by the harmonized system (HS) of tariff classification that is now used by all members of the World Trade Organization (WTO) giving a common classification down to the six-digit level. The value for duty system is used for all imports and is governed by Article VII of the General Agreement on Tariffs and Trade (GATT) 1994 and the Agreement on Customs Valuation concluded in the Uruguay Round. Hence, the application of tariffs depends, practically speaking, on the tariff rates and the rules of origin. Since the...

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